Email your queries to [email protected] or fax them to 021 488 4119. This feature is sponsored by Old Mutual Wealth.


How is the CGT exclusion applied if I have more than one residence?

I understand that, on the disposal of a primary property, the gain or loss up to R2 million is exempt from capital gains tax (CGT). My questions are:

1. If I sold my primary property and moved into my secondary property, without purchasing any further property, does my secondary property become my primary property if I can prove that I am living there?

2. A person has two properties: one purchased in 2005 and another, in which he or she has lived for the past 10 years. If he or she sells both properties, which one qualifies for the R2-million exemption?

Terry Haywood


Janine Player, a financial planner at Old Mutual Private Wealth Management in Durban, responds: The Income Tax Act excludes the first R2 million gain or loss from CGT on the disposal of a primary residence by a natural person. The test for determining whether a property is a person’s “primary residence” is that the owner must ordinarily reside in the property and the property must be used mainly for domestic purposes.

On the sale of your first property, you will qualify for the full R2-million exclusion. However, your second property will qualify as your primary residence for only a portion of your total period of ownership, because you did not use it as your primary residence for the entire period. You will have to apportion the capital gain or loss between the period of primary residence over the total period of ownership, and the R2-million exclusion will apply only to the period the property was used as your primary residence. For example, if you owned the property for 10 years, but used it as your primary residence for five years, only 50 percent of the gain or loss will qualify for the exclusion.

A person cannot have more than one primary residence at the same time, but there is no limit on the number of times a person can qualify for the exclusion, as long as the property qualifies as a primary residence on every disposal.

However, a person who regularly disposes of and acquires primary residences as part of a profit-making scheme could be subject to full inclusion of the capital gain, as is the case with people who deal in shares.

You state that you “reside” in the second property. In my view, therefore, the exclusion will apply only to the disposal of the second property. However, you will qualify for the R40 000 annual CGT exclusion for natural persons.


How can investors cope with volatile markets?

Many of my friends have suggested that I move my money offshore or invest in our local stock market. My question is simple: given all the recent geopolitical issues, how do I invest in a roller-coaster stock market?

Sue Loots


Henry van Deventer, the head of wealth development at Old Mutual Private Wealth, responds: It has been quite a challenging 12 months for investors. Wherever we turn, the media is reporting on the weak rand, negative investment returns, and doom and gloom for South Africa’s economy. Added to this are the Brexit vote, turmoil in Europe and the prospect of Donald Trump becoming the next president of the world’s largest economy. In times like these, investors ask questions such as “Is it not better to earn interest in a fixed deposit?” and “Should I not cash in my investments and wait for the tide to turn?”.

Most of what you read focuses on the economy, the rand, political uncertainty and market trends. Although this information is important, you need to understand that there are two sides to being a successful investor: managing your investments and managing your behaviour.

Although it is impossible to control investment markets, you can choose how to react to these events. It can be hugely beneficial to understand the consequences of your decisions and how they will affect your portfolio over time.

Daniel Kahneman, the 2002 winner of the Nobel Memorial Prize in Economic Sciences, draws a clear distinction between thinking fast and thinking slow when it comes to investing. Fast thinking is instinctive and emotional – a knee-jerk reaction. It is the first reaction to uncertain markets when fear and uncertainty prevail. Slow thinking is about making more considered decisions.

Having a framework for making these decisions will help you to be more successful over time.

Reports on the share market tend to focus on the short term, which creates uncertainty and anxiety in the minds of investors. You have to understand that most of your investments are intended to be long term (for example, to fund your retirement), and that it makes sense to think of risk in the context of the period for which your money will be invested.

The graph shows the growth of an investment in the South African share market over the past 20 years. It also shows that, although emotions drive markets up and down over the short term, the fundamentals of economics drive them upwards over the long term.

Here are the four key things you can do to manage your investments more effectively:

1. Don’t measure investments against the market. Instead of focusing on the share market, the rand or the best-performing funds, focus on achieving the returns you need and measuring your progress against that. Investing successfully is about getting your money to work for you over time.

2. Control exposure to risk. More than 90 percent of an investment’s risks and returns are determined by its underlying asset allocation (such as shares, property, cash, bonds, local and international exposure). The best way to control risk is actively to manage the asset allocation of an investment.

An actively managed investment strategy focuses on doing this on an ongoing basis on behalf of investors. With such an investment, you can rest assured that you don’t need to make any changes to deal with market risk – that’s already being done.

3. Know what to expect. You need to understand how likely it is that your investment will make or lose money, and how big those gains or losses could be.

4. Monitor risk tolerance in line with the investment framework. Rather than focusing on whether your investments are gaining or losing money in the short term, the question should be if they are on track to achieve their desired returns.

Old Mutual Wealth did some research on the impact of sticking to the above framework. Over the past 10 years, investors who followed these guidelines were, on average, 1.24 percent a year better off than investors who did not. On a R1-million investment over 20 years, this amounts to additional growth of almost 27 percent (about R600 000).

Having a framework to help you to think more slowly will not only improve your investment returns, but will also give you the peace of mind that comes from exercising power over the things that you can control.


Old Mutual Wealth provides integrated wealth planning and goal-based planning through financial planners, backed by global expertise and research. In order to create Old Mutual Wealth, Old Mutual has consolidated the expertise and resources of several established businesses: Acsis, Fairbairn Capital, SYmmETRY Multi-Manager, Old Mutual Unit Trusts, Old Mutual International, Celestis, as well as some investment consulting resources from Old Mutual Actuaries and Consultants. Strengthening Old Mutual Wealth’s position is the recent acquisition of Fairheads Trust Company.